Wednesday, October 26, 2011

In the book Freakonomics, the authors did a study of prices of homes sold by property agents for their clients and compared it with the price of homes when the property agent is acting for himself i.e selling his own home. They found that the property agents sold their own homes at a price significantly higher than the homes of their clients. The property agents' interest is to earn a commission and to do that they try to make sure transactions go through by persuading sellers to lower their selling price and buyer to up their bid. Many Singaporeans are not aware of this but you can sell your home quite easily without a property agent - the paper work is relatively simple. My father sold his HDB more than 20 years ago without an agent and it is easier to do it now because of the Internet which enables sellers to put up ads for free at various websites. (here is a forum on people sharing their experience of selling their HDB without an agent amd HDB itself conducts a regular seminar on how to sell your home without an agent[Link].

If you walk around the town central of a HDB estate, say Toa Payoh Central, what you will see is one 2nd hand phone dealer after another. Sometimes within an area of 50 meters by 50 meters, you can count up to 20-30 of such small shops. They exist because new hand phones models are introduced by manufacturers every few weeks and your iPhone 4 becomes yesterday's model when the 4S is released. Singaporeans get rid of their old phones through these middle men. The other day I was standing by one of these shop and a young men sold his relatively new phone for $80 to the dealer. I was very familiar with the model as I was thinking of buying one for myself and it was changing hands in the www.hardwarezone.com.sg bazaar[Link] at about $140 or higher. Without much hassle, the seller could have gotten an extra $60. People sometimes sell the stuff at Cash Converters or pawn shops because they need money quickly - the problem is they are actually throwing money away because they get far less than what they can get for their goods at a time when they need money badly. The lesson is not to get into a desperate situation when you have to "fire-sale" your belongings.The proliferation of pawn shops like Money Max [Link] perhaps tells us that more Singaporeans are getting into financial situations where they need cash quickly....and this is exploited by the numerous 2nd hand phone dealers, money lenders and pawn shops.

On History Channel, there is a TV show called Pawn Stars[Link]. The show follows the going ons in a Las Vegas pawn shop operated by a family. Given the subject matter, the show is surprisingly successful and has a large following since its debut in July 2009. The show sometimes gives you a hint of the economic malaise in USA as some of the people were pawning away their family heirlooms passed from one generation to another to make ends meet. People were selling their belongings to raise money for medical treatment, rent and so on. The Harrison family running the pawn shop makes a good living buying and selling....they are all overweight from sitting around in their shop ...here's a clip from the show:

A woman walks into the pawn shop asking $2000 for a Fabergé brooch. Mr. Harrison being a man of conscience knowing the real value of the brooch offers to buy it for $15,000. The truth is this :if the brooch is genuine Fabergé , it is worth something in the region of $80,000-$250,000. Either the woman walked in with a fake and cheated the pawn shop or the pawn shop just made something like $100K from a $15K sale. So even a middle man with conscience like Rick Harrison of Pawn Stars is not averse to making excessive profits off people who are ignorant and too lazy to double check the value of what they are selling. Next time think twice before you go to a middle man to sell something specially if you don't know how much it is worth!

Even if you are rich and don't need to squeeze every dollar from the 2nd hand stuff you're selling, you might want to consider selling it direct to buyers....you're doing a favor for them and yourself. If your price is good (still higher than what you can sell to the middle men) many buyers are willing to drop by your house to pick it up and that is more convenient than bringing it down to cash converters or to a 2nd hand phone dealer.

Websites on the Internet where you can offer your 2nd products for sale:

41 comments:

Anonymous
said...

I play guitars and I try to sell guitar related equipment that I don't need to other guitarists directly. I used to sell to 2nd hand guitar shops but over time, I find that the shops buys over my stuff at too low a price than I can stomach, at around 10% to 20% of the original prices.

Selling my stuff on the net takes a bit of time but at least I can recoup 40% to 60% of what my equipment original costs.

Currently I consider my future purchases more carefully the next time round to ensure that I only buy what I need.

Your this post is good. Not like those socio political posts which although fun to read but will not make any difference for the better to local politics and society.

Good because it is informative and helpful to those who need cash and have a fair deal. But one should also spend wisely so that they don't need to buy those stuff in the first place and later have to pawn them for money at a loss.

And for buy/sell property, I will take your advice by doing it without an agent.

This post is offers great practical financial advice. It helps people save money. Would you mind if I were to repost your post on my blog (http://help-your-money.blogspot.com)? It is also for my future reference.

While your post contains good financial advice, it is somewhat sad that it will break the ricebowls of property agents. A number of my former colleagues have become property agents. Even sadder to say they were engineers. So, they have switched from a profession which create more societal value to one which creates lesser.

Middlemen such as property agents make money from their customers' ignorance. Come to think of it, I think they will hate you for this, particularly when your blog has such a wide following.

Besides middlemen, I also against cab companies acting like landlords leeching off the labor of taxi drivers and lawyers making money from the conveyance monopoly a job that can be easily performed by license conveyors....

"Hyom wrote:Even sadder to say they were engineers. So, they have switched from a profession which create more societal value to one which creates lesser."

I disagree.

If engineers were that vital and important, they would be paid more. Last time I checked, society values lawyers and bankers much more than they value engineers.

Engineers are a dime a dozen, which explains why we need to and can easily churn out thousands of engineers a year, import thousands more and still pay them a basic starting pay of $2800 a year with little increment.

The starting pay, median pay and annual bonuses for bankers, stock traders are much more lucrative.

The average successful property agent can easily earn many times the income of a successful engineer.

It's hard to argue that one is more valuable when society is reluctant to pay you more.

Moving along the vein of often being bounded by what we limit ourselves, I remember at one period in time the government was selling 'engineers' like hotcakes. Every mother's son went into engineering - be it civil, electrical, mechanical, etc. Now we have an oversupply and these engineers too can be replaced by foreigners.

I took the bold step forward and moved away from what the government was publicising. We, Singaporeans, need to think beyond just what the government wants of you. To the government, often you are just a digit number.

In Singapore we are not lacking information nor do we have restriction of most materials. Unfortunately many just follow whatever the government dishes out and swallow it whole - hook and bait.

I don't think the younger generatiom of Singaporeans, in particular those who are below 35 years of age. They're the ones who says, "Eh, more foreigners who can't speak English are taking away opportunities in my tiny island; and the government is making life stressful for the people with its groupthink malaises."

These are the ones who are voting against the bad system which has led to such a pressure cooker society.

And they don't think twice about it. The GRC shield is a myth to these younger Singaporeans. From 77% to 66.6% to 60.1%, their votes are dropping likes cows.

But this GE 2011 is unique; everyone came in to speak out. And this is understandable given the PAP's poor track record over the last 10 years and their incredulous misactions of not accepting moral leadership and responsibility.

If they keep at it without serious soul-searching, Singaporeans will patiently wait for another 4 years to send a clearer signal. By this time, all HDB flats would have been upgraded.

No decent, humble Singaprean would accept a millionarire minister.

The government needs to win the people's trust over as that trust has been broken from the ample bullying that Singaporeans have witnessed over the years with this party.

Singaporeans are disenfranchised and disillusioned. And rightfully so. They are wondering why 40% who are against their policies are given a less than 7% representation of a voice in parliament.

Singaporeans are asking one another: "What kind of system is this that denies the 40% a proportionate voice in parliament?"

In a MERITOCRATIC SYSTEM, 40% voters ought to get a 40% voice in parliament. As much as the government espouse and chants its mantra of MERITOCRACY, we cleary are not witnessing such an axiom in action in the political system itself.

We need middelmen because we have too many things to do, and we become less focused. We also are too lazy to do somethings ourselves.

Here are some examples:

1) I just want to collect rental income. But I don't want to have to deal with the hassle of dealing with estate management and upkeep and finding tenants. So I hire a manager or invest in a REITs. I get a middleman.

2) Core duty of soldiers is to train and prepare for war. I don't want to be bothered with non-essentials such as area-cleaning or cooking food. I outsource to a middleman.

3) I want the public transport to run smoothly. But I don't want the hassle of maintaining, upgrading and running the whole system. I outsource to SMRT and SBS, etc etc

4) I am too busy to learn how to handle paperwork for property transactions. So I get an agent to do it for me.

Middlemen do play a role that we are either too busy or too lazy to do for ourselves. Of course must be ready to pay more lor.

I usually read your posts on politics and economics. This post was a refreshing change.

Recently, bought a hp and sold old one online. Managed to save min. $150 buying online versus buying from shop. Selling was a breeze as there was fast response. I also enjoy interacting with potential buyers and sellers.

"Engineers are a dime a dozen, which explains why we need to and can easily churn out thousands of engineers a year, import thousands more and still pay them a basic starting pay of $2800 a year with little increment."

Likewise for lawyers, teachers, doctors, accoutants, bankers, doctors. It all depends how much you want to protect the market and the degree of professionalisation in terms of entry barriers. Have you noticed why we have so many filipino nurses but not doctors. think hard and you will understand.

Last time in the old days, one did not need to have all the qualifications to do a lot of things e.g driving forklift, taxi, be a property agent or insurance agent, hotel management, cleaner, etc, etc.

In olden day Singapore, many transactions were done based on trust. No need middleman, lawyer and even government.When looking for job, no need this cert that cert, now to sweep the longkang, they want cert.The system simply sucks nowadays

Lucky you must think thru what you are writing .... Also your readers all shoot from the hio without thinking ....We play right into their hands when we the people are divided... Every job is survival to everyone who took it up ...even a whore , yes i mean protitute...What makes one a whore & you a saint.... People work to make ends meet....Dont lose sight of your arguments ....The question is how did the system or did we come to this state of affairs. It is shallow to label & generalize without understanding deeper why & how society became what it is. Its not just here in sgp. Its global . While your readers go at each others throat .... The Powers that be are making away with the loot.....the taxes , the regulations , the social economic engineering.We use labels like democracy , communism, socialist , free market & refer to their narrow definitions which are designed to make you chase your own tails ....Call it whatever you want but do not loose sight of the big picture.What most middleman makes are pittance compared to the scams & fraud perpetrated by the big boys , yet middleman are mostly unaware , for they are made to believe that they are truly making an honest living.

After I reposted this post of yours on my blog, someone contacted me and expressed interest in paying me for some advertising purposes. Since the post belongs to you, I would like to redirect this opportunity back to you. However, I cannot find your email address on your blogger profile. If it is fine with you, could you send your email address to help.your.own.money@gmail.com ?

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